Malaysian Bulk Carriers BUYMalaysian shipping sector, with operations mainly in the transport of dry bulk cargo and tankers, with a fleet of 15 vessels and plying routes in the Asia

KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT DISCLOSURES

17 June 2011 | Initiating Coverage

Malaysian Bulk Carriers BUY Lifting Anchor and Unfurling the Sails Target Price (TP): RM2.82

The shipping sector is expected to continue to struggle for the

rest of 2011, given vessel oversupply conditions and

deteriorating demand. However, a sector rebound is expected

in 2012 on the back of increasing voyage distance, port

congestion, rising charter and dry bulk rates. We are calling a

BUY on Malaysian Bulk Carrier with a target price of RM2.82,

based on FY12 PER of 14.4x. The multiple is about 15%

premium to regional peers.

BACKGROUND Malaysian Bulk Carriers Bhd (Maybulk) is a major player in the

Malaysian shipping sector, with operations mainly in the transport

of dry bulk cargo and tankers, with a fleet of 15 vessels and plying

routes in the Asia Pacific and South Asia regions. Its operations

started in 1995 as a JV between Bank Pembangunan, the Ministry

of finance and Kuok Group. Maybulk was listed on the Main Board

of KLSE on Dec 2003. Maybulk is presently controlled by the Kuok

Group (Singapore) which own 34.46%, Minister of Finance,

18.39%, followed by PPB Group, 14%.

Prudent management team. Maybulk is led by a team of

experienced personnel with more than 30 years experience in the

shipping industry, who include:

Name Background

Mr. Teo Joo Kim, 70, Singaporean, Executive Chairman

• Appointed to the Board on 25 January 1995.

• Also the Chairman of Kuok (Singapore) Ltd and Pacific Carriers Ltd.

• More than 30 years experience in the commodity and shipping industry.

Mr. Kuok Khoon Kuan, 64, CEO

• Joined the Board on 8 June 1995.

• Also the Director of Kuok (Singapore) Ltd.

• Has over 30 years of experience in the shipping industry.

Source: Company, MIDFR

RETURN STATS

Price (14 June 11) RM2.30

Target Price RM2.82

Expected Share Price Return

+22.55%

Expected Dividend Yield +6.37%

Expected Total Return +28.91%

STOCK INFO

KLCI 1,554.24

Bursa / Bloomberg 5077/

MBC MK

Board / Sector Main/ Trading

Services

Syariah Compliant Yes

Issued shares (mil) 1,000.00

Par Value (RM) 0.25

Market cap. (RM’m) 2,300.00

Price over NA 1.3x

52-wk price Range RM2.23–RM3.03

Beta (against KLCI) 0.83

3-mth Avg Daily Vol 0.3m

3-mth Avg Daily Value RM0.86m

Major Shareholders

Kuok (Singapore) 34.46%

Minister of Finance 18.39%

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Corporate Milestones:

Year Major Events

2010 Voted second place for “Best Mid-Cap” company in FinanceAsia’s 10th

annual poll of Asia top companies.

2008 Received KPMG Shareholder Value Award 2007- Sectoral Winner in Infrastructure.

2006 Won the 2006 Lloyd’s List Maritime Asia “Bulk Operator Category” award.

2005

The Group received the following awards:-

1) KPMG Shareholder Value Award 2004 – Sectoral Winner in Infrastructure.

2) KPMG Shareholder Value Award 2004 – overall second in the list of top 100 listed companies on Bursa Malaysia in terms of value creation for its shareholders.

3) “Ship of the Year” award as presented by Lloyd’s Maritime Asia, for vessel Alam Padu.


Operations. Maybulk operates in three segments: 1) Bulk Carriers - ranging from 23,000DWT (Handysize) to

87,000DWT (Post- Panamaxes), 2) Tankers- ranging from 45,500DWT to 47,000DWT, and 3) Ship Management. Its

bulk carriers are involved in the transportation of dry cargoes comprising major bulks, such as iron ore, coal (steaming

and coking coals), grains and minor bulks, e.g. sugar, coke and fertilizers. Apart from its own vessels, the company

also charters-in third party vessels to service contracts of affreightment commitments. The tankers are engaged

primarily in the seaborne transportation of clean petroleum products, chemicals and vegetable oils. Meanwhile, its ship

management involves marine operations, technical management of vessels, ship supplies and crewing, which are

undertaken by its wholly-owned subsidiary PSM Perkapalan Sdn Bhd (PPSB).

As of February 28, 2011, Maybulk has a fleet of 15 ships, of which 11 are bulk carriers and 4 are product tankers. The

average age of Maybulk’s fleet is 9 years (as compared to average global drybulk fleet of 20 years). Most of its 11 bulk

carriers are modern Panamax bulk carriers aged under 5 years old (see Appendix I for fleet information). Given its

relatively young age profile, Maybulk can command a premium on its charter rates. Maybulk currently holds 2%

market share of the global drybulk shipping.

Figure 1: MARKET SHARES OF REGIONAL PEERS

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Source: Bloomberg, MIDFR

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An international drybulk shipping group. Drybulk cargo accounted for 87% of the company’s FY10 sales and 78%

of its operating profit, followed by the tanker business segment’s share of 11%. This is consistent with the Group’s

fleet profile which mostly consists of drybulk carriers (appox. 80% of total DWT capacity). Other businesses which

comprise of ship brokerage and management services, accounted for the remaining 2% of total revenue but 21% of

EBIT.

Figure 2: FY10 REVENUE BY SEGMENT Figure 3: FY10 EBIT BY SEGMENT

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Source: Company, MIDFR Source: Company, MIDFR

Maybulk’s forays into OSVs. In Dec 08, Maybulk acquired 21.2% stake in PACC Offshore Services Holdings

(POSH), for US$221m or USD6.50/ share and in the meantime disposed its offshore accommodation vessel, PAC

Bintan to POSH for USD24m. The remaining amount of USD197m was settled by cash. POSH was incorporated in

March 2006 and was previously a wholly-owned subsidiary of PCL. The company mainly provides offshore marine

support services for the oil and gas industry. POSH owns and operates more than 50 offshore support vessels (OSVs)

in the region presently (see Appendix II for company details). The international offshore support vessel sector has

enjoyed large-scale growth since year 2000 to 2008; however, it had been soften for the recent years as charter rates

have been decreasing due to increased supply of vessels. In Maybulk’s recent announced 1QFY11 results, POSH

posted a 57% decline in its profits caused by the weak offshore services market, and this has in turn resulted in a

RM2.8m fall in its contribution to the group. We expect the future prospects for the offshore support vessel sector to

be positive in the near- term, although current newbuilding orders may continue to place a downward pressure on day

rates in the near future. However, we think the continued exploration and development of new and regenerated

offshore oil and gas discoveries will maintain interest in the offshore support sector well into the future.

Figure 4: Profits attributed by associate- POSH

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1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

RM'000


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FINANCIAL/ EARNINGS REVIEW

Maybulk’s FY10 net profit was 6% below street consensus, registering 2% drop, from RM247.8m in FY09 to

RM242.7m in FY10. The unfavourable full year results was mainly dragged down by the slimmer bottomline in

4QFY10, which was fired up by weaker revenue in bulk segment as well as lower gain from its associate- POSH. The

said quarter posted only RM67.7m, a 22.8% slump, compared to RM88.4m in FY09. However, FY10 topline remained

solid at RM404.2m (+33.1%yoy) versus RM303.7m in FY09 and full-year EBIT rose 139% to RM174.8m (versus

RM73.3m a year ago) as bulk earnings recovered on higher spot rates. We are projecting lower earnings in FY11 vis-

à-vis the previous year figure as the lucrative three-year Tenaga COA that was fixed at very high rates in June 2008

will expire in mid-2011. The COA was fixed at an estimated USD60,000-90,000/day, against MBC’s average of

USD25,993/day in 2010, and may have absorbed one panamax-equivalent ship for an entire year. Assuming a

downward re-pricing of the Tenaga COA from July onwards to USD16,000/day, and expiry of other long-term charters

this year, we forecast a 18-20% decline in the average rate, hence topline to be adversely hit by 13%.

Figure 5: REVENUE & PROFIT TREND


Bulk was up, but tanker and offshore soften in FY10. Bulk shipping segment soared 44.3% to RM349m in FY10 as

earnings days ascended 14% due to more vessel capacity, and average rates was up 36% on the back of improved

spot market. Unfortunately, FY10 saw tanker business hit the dirt to just RM46m (-16% yoy) compared to RM54m in

FY09, dragged by 25% dip in average rates. Meanwhile, contribution from its associate- POSH also dwindled 78% yoy

as a result of weaker offshore rates and lower vessel utilization.

0

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2006 2007 2008 2009 2010 2011F 2012F 2013F

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Revenue Profit

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Figure 6: OPERATING PROFIT AND AVERAGE TCE FOR BULK


Figure 7: OPERATING PROFIT AND AVERAGE TCE FOR TANKER


More vessel disposals. On 1st November 2010, Maybulk disposed its Alam Selamat, an 18-year old handymax ship

for USD15.9m, translating RM22.8m in disposal gains. Followed by, Alam Bitara, a 12-year old MR tanker sold on 15th

February 2011 for USD19m due to vessel quality issues, netting a RM6m gain (refer to Appendix I for fleet

information). However, we expect Maybulk to pursue more vessel acquisitions than disposals moving forward as

vessel prices fall.

Latest quarterly/ interim performance. Maybulk announced its 1QFY11 results last month. Stripping away

exceptional items amounting to RM7.2m, 1QFY11 net profit dropped 14% due to 26% slumped in revenue. The drop

was mainly caused by the fall in hire rates for both the dry bulk fleet and product tankers. The outlook for tanker

market remains unfavourable, resulting in 21% lower average hire rate although hire days increased by 6% to 280

days. On top of that, Maybulk also posted significant decline in profit contribution from its associate- POSH (-62%yoy).

The weak performance was due to the soft offshore services market and oversupply of capacity in the sector. For

1QFY11, bulk hire days up 16% yoy to 1,104 days while average bulk TCE rates dipped 29% to USD21,398/day

versus USD30,260/day a year ago. Despite higher hire days, tanker contribution continued to be weak with average

TCE rates at USD12,610/day in 1QFY11 compared to USD15,938/day registered in 1QFY10. No dividend was

declared for the quarter.

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10,000

20,000

30,000

40,000

50,000

60,000

70,000

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

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5,000

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15,000

20,000

25,000

30,000

35,000

Bulk operating profit (RM) Bulk TCE (USD/day)

(2,000)

(1,000)

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1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

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Tanker operating profit (RM) Tanker TCE (USD/day)

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Figure 8: BULK TCE RATES AND HIRE DAYS

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1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

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Bulk TCE (USD/day) Bulk (Hire Days)


Figure 9: TANKER TCE RATES AND HIRE DAYS

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1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

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Tanker TCE (USD/day) Tanker (Hire Days)


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PROSPECTS A tale of two different markets. We are positive on the sector in the long run but not immediate term as we expect

recovery and the next upward cycle of the dry bulk market to occur only in 2012 and onwards. In our view, the

strength in the sector is underpinned by strong demand for iron ore, coal, and grain. Increasing voyage distance

coupled with port congestion will tie up even more shipping capacity, hence drive up charter rates. Dry bulk is a tale of

two different markets, with capesize rates the only rates that have been struggling to meet operating costs. Panamax,

supramax, and handysize rates, on the other hand, continue to exceed operating costs, but the market continues to

look at all vessel classes as in the midst of crisis.

China and India will be the main driver. Dry bulk trade growth in recent years has been driven mainly by Asian

demand for the three key bulk commodities – coal, iron ore, and increasingly grain. While the booming dry bulk sector

is underpinned by the strong global economy, its two pillars of support are the two Asian economic giants, China and

India. Both are voracious consumers of coal and iron ore, with grain imports set to rise in China as food production

plateaus and per capita consumption rises. We expect Chinese iron ore and steel demand to remain firm. Meanwhile,

India’s coal needs will also become a major factor for dry bulk trade in the coming years as the country’s imports are

expected to grow by at least 10% per annum.

Iron ore- the main driver for dry bulk trade. The global seaborne iron ore trade has shown constant growth in the

past decade and is expected to continue its 10% growth per annum in the years ahead due to expected growth in

demand and production of steel in many major economies, mainly in China, accounting for 45% of world’s iron ore

imports in 2010, followed by Japan, Korea, India, US and Europe. On the back of that, India is continuing to grow its

internal steel production at greater pace than world average rates. With 37% of the world’s population, we believe that

China and India has significant growth potential in its underlying steel consumption and demand.

China power shortage may increase higher iron-ore imports. However, according to industry experts, China is

facing acute power shortage issues. We believe this will put pressure on steel production and iron ore demand. Iron

ore imports will likely come under moderate pressure in the near term. However, we understand that China’s domestic

iron ore is of low quality and we believe that this may provide support for iron ore imports as high quality iron ore

requires less electricity for steel production. This may explain why Chinese iron ore fixtures volumes have sustained,

providing support to capsize rates. We believe that the electricity shortage issue is also likely to result in more thermal

coal being imported.

Coal to be the next “iron ore” for dry bulk trade? Coal has became an important resource for emerging markets

such as China and India due to its energy needs. Both countries are experiencing an increasing level of manufacturing

activities and growing population. In these two countries, coal is the major energy resource for the production of

electricity at a proportion of 90% for China and 82% for India.

The demand for coal, both thermal and coking coal, increased in 2010 in the light of growth in all major markets and

the same is anticipated to continue to increase due to growing imports of thermal coal by China and rising demand for

coking coal by India. According to International Energy Association (IEA), China accounts for 43% of the global coal

consumption, followed by the US at 16% and India at 8%. Going forward, the IEA expects the total consumption in

China to increase by 27% by 2015, and that of India to rise by 21%, while US consumption should remain stable.

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Figure 10: GLOBAL COAL CONSUMPTION AND FORECAST

FY10

Others

33%

India

8%

US

16%

China

43%

FY11-15F

Others

19%

India

10%US

16%

China

55%

Source: IEA data, MIDFR

China consumes roughly 3.5bn tons of coal per year, and coal imports contribute to only a fraction of overall Chinese

coal consumption. As such, we do not expect coal will be the next “iron ore”, as we are not expecting an increase in

Chinese coal imports. Ongoing electricity shortages and land transportation constraints have prompted the Chinese

government to begin focusing more on constructing coal bases along the Yangtze River, Beijing-Hangzhou Grand

Canal, and the coast. As such, we expect that coastal and river coal trade will expand significantly, which will require

the use of smaller dry bulk vessels such as Handymax. The government has also recently announced that the

Yangtze River will be further dredged to allow vessels with a carrying-capacity of up to 50,000tons to be able to travel

from Shanghai to Nanjing by 2015. Besides China, we also believe Indian coal imports will continue to grow. Indian

demand for thermal coal and coking coal is expected to rise by at least 10% during the next few years, as Indian

electricity consumption and steel production continues to increase.

Longer voyages- distance effect leads to higher effective demand. Japan and China are turning to increasingly

far flung resource regions for supplies. Longer voyages ties up more shipping capacity and command higher freight

rates. In our view, we believe this trend is likely to continue for the reasons below:

• Substitution effect: increasing domestic utilization of internal resources- More emerging countries, such as India

and China, are utilizing more internal resources for domestic use. For example, India, the main supplier of iron ore

to Asia after Australia and Brazil, has imposed an export tax to help preserve resources for domestic

consumption. China has imposed an export tax on coal, while Indonesia is also imposing export taxes on iron ore,

coal and palm oil for the same reason.

• New alternative sources: Lower exports, as mentioned above, will force emerging economies to seek alternative

sources. In the case of India’s lower iron ore exports, economies such as China will have to source ore from

elsewhere, such as Brazil. At two to three times the distance between China and India, we expect an increase in

the tonne-mile demand. Likewise for Indonesia, if it raises export taxes, buyers would have to look to distant

suppliers, such as South Africa and Latin America.

• Economic security: Diversifying risk by sourcing from a number of regions. China has done this by sourcing oil

from Venezuela, which is logistically inefficient relative to the Middle East. Apart from geopolitical considerations,

the diversification helps ensure a more stable supply line of resources for the economy, moderating any shocks

from the more traditional sources.

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Figure 11: ESTIMATED ROUND-TRIP VOYAGE TIMES

From To No. of days

China Korea 7 to 11 days

Korea Australia 20-22 days

China India 30 days + 15 to 20 days for congestion

China Brazil 60 days + 5 to 7 days for congestion

Source: Company data, Wikipedia, MIDFR

BDI on the falling trend since the beginning of this year with a few spikes here and there. We do not expect an

immediate recovery, particularly capesize and panamax rates as these two vessel classes are under the greatest

pressure due to vessel oversupply. However, the market has continued to show that significant increases in spot

freight rates can occur despite the vessel oversupply problem. We anticipate that freight rates will continue to be

periodically assisted by surges in commodity demand and availability.

Figure 12: BALTIC DRY INDEX (BDI) TREND

Source: Bloomberg

Strong commodity demand has continued to allow dry bulk freight rates to remain rather resilient. We continue

to expect that global commodity demand will rebound as we head into the summer months. Chinese thermal coal

demand is expected to remain robust and imports are expected to surge due to the significant difference between

domestic Chinese thermal coal prices and regional prices. In addition, global grain demand is expected to remain

strong, and Russian wheat exports will be returning in July. Prospects are less encouraging for iron ore, however, as

major Chinese steel mills will be receiving less electricity. There is a chance, though, that demand for higher quality

iron ore will increase, as making steel with higher quality iron ore requires the use of less electricity.

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RISKS

• Unexpected congestion at Chinese ports, which could result in longer-than-expected rise in demand for Capesize

vessels. A demand switch to Capesize vessels will negatively affect Maybulk as it does not own any Capesize

vessels.

• Strengthening of MYR vs. USD will have an adverse on Maybulk, in the form of translation lost, as its functional

currency is USD.

VALUATION

Expect strong rebound in earnings in 2012: We are projecting Maybulk to post lower EPS11 of 14.7sen but

expecting better EPS12 of 19.6sen. We are still cautious on the sector outlook for 2011, given vessel oversupply

conditions and deteriorating demand. However, improvement is expected in 2012 onwards, on the back of 1)

increasing voyage distance coupled with port congestion that will tie up even more shipping capacity, hence drive up

charter rates; and 2) dry bulk freight rates to be supported by surges in commodity demand and availability. Besides,

we are fond of Maybulk for its consistent and attractive dividend payout.

BUY with a Target Price of RM2.82: Assigning FY12 PER of 14.4x (at 15% premium to regional peers) and FY12

EPS of 19.6sen, our Target Price stands at RM2.82 with an upside potential of 22.55% and dividend yield of 6.37%.

Hence, we initiate coverage on Maybulk with a BUY recommendation.

Figure 13: PEERS COMPARISON

P/E (x) P/ BV (x) Div. Yield (%) ROE (%) Company

FY11 FY12 FY11 FY12 FY11 FY12 FY11 FY12

TTA 26.0 15.2 0.5 0.5 1.4 2.0 1.4 2.0

Precious Shipping 17.3 12.2 1.0 1.0 3.7 4.8 3.7 4.8

STX 27.5 10.4 0.6 0.6 1.2 1.8 1.2 1.8

Pacific Basin 12.3 12.3 0.7 0.7 3.9 4.1 3.9 4.1

Maybulk 15.6 11.7 1.2 1.2 2.8 3.7 2.8 3.7

Average (ex Maybulk)

20.8 12.5 0.7 0.7 2.5 3.2 4.3 5.7

Source: MIDFR, Bloomberg

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INVESTMENT STATISTICS

FYE Mar FY09 FY10 FY11F FY12F FY13F

INCOME STATEMENT (all in RM’000 unless stated otherwise)

Revenue 303.7 404.3 352.1 447.9 579.2

EBIT 165.3 212.9 149.2 197.8 265.7

Pretax Profit 248.3 244.4 153.1 204.2 274.9

Net Profit 247.7 242.7 151.6 202.1 272.1

EPS (sen) 24.4 23.8 14.7 19.6 26.4

EPS (%) 47.1 -2.2 -38.3 33.4 34.6

PER (x) 9.43 9.65 15.64 11.73 8.71

Net Dividend (sen) 30.0 15.0 6.4 8.5 16.3

Net Dividend Yield (%) 13.0 6.5 2.8 3.7 7.1

Source: Company, Forecasts by MIDFR

FYE Mar FY09 FY10 FY11F FY12F FY13F

BALANCE SHEET (all in RM’000 unless stated otherwise)

ASSETS

Non-current assets

Fixed assets 627.5 562.4 531.4 502.2 474.6

Associates 815.6 746.0 726.1 704.1 679.9

Jointly controlled entities 139.9 136.9 157.2 177.4 197.7

Total non-current assets 1,601.6 1,445.4 1,414.5 1,383.4 1,351.6

Current assets 694.6 551.9 548.3 787.3 912.8

Total assets 2,296.2 1,997.2 1,962.8 2,170.7 2,264.4

EQUITIES & LIABILITIES

Shareholders equity 1,787.1 1,685.8 1,769.1 1,880.3 1,981.0

Long term borrowings 345.0 107.0 90.9 75.3 60.2

Short term borrowings 7.7 43.1 43.1 43.1 43.1

Total current liabilities 90.1 147.8 147.8 147.8 147.8

Total non-current liabilities 345.0 107.0 90.9 75.3 60.2

Total liabilities 435.1 254.8 132.4 223.1 208.0

Total equity and liabilities 2,296.2 1,997.2 1,962.8 2,170.7 2,264.4

Source: Company, Forecasts by MIDFR

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DAILY PRICE CHART

Zulkifli Hamzah Ng Wei Nie [email protected] 03-27721663

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APPENDIX I MAYBULK: FLEET INFORMATION BULK VESSEL FLEET AND NEWBUILDING ORDERS

Vessel Name Year Built Age (yrs)

Own/ Lease

DWT Category % owned

Alam Senang Mar-84 26.4 Own 28,098 Handysize 100%

Alam Gula May-85 25.2 Own 23,418 Handysize 100%

Alam Mesra Oct-00 9.8 Own 46,644 Handymax 70%

Alam Padu Apr-05 5.3 Own 87,052 Post Panamax 100%

Alam Permai Jun-05 5.1 Own 87,052 Post Panamax 100%

Alam Pesona Sep-05 4.8 Own 87,052 Post Panamax 100%

Alam Pintar Oct-05 4.8 Own 87,052 Post Panamax 100%

Ikan Juara Feb-06 4.4 Own 32,500 Handysize 70%

Alam Penting Jul-05 5.0 JV owned 87,052 Post Panamax 50%

Alam Murni Apr-03 7.3 JV owned 53,553 Handymax 50%

Alam Manis Mar-07 3.3 Lease 55,500 Supramax n/a

Existing Capacity 674,973

New leases to be delivered

To be named 2011 Lease 29,000 Handysize n/a

To be named 2011 Lease 29,000 Handysize n/a

To be named 2012 Lease 61,000 Supramax n/a

To be named 2013 Lease 61,000 Supramax n/a

New Leases 180,000

Resale purchases

To be named May-11 JV owned 32,500 Handysize 50% JV with Espinosa

family

To be named Aug-11 JV owned 32,500 Handysize 50% JV with Espinosa

family

New Orders 65,000


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TANKER FLEET

Vessel Name Year Built Age (yrs)

Own/ Lease

DWT Category % owned

Alam Budi May-01 9.3 Own 47,065 MR 100%

Alam Bistari May-01 9.2 Own 47,065 MR 100%

Alam Bakti 2003 7.0 Own 47,065 MR 100%

Total 142,125

Recently Sold

Alam Bitara May-99 11.2 Own 45,513 MR 100% sold on Feb-11


LATEST VESSEL SALES

Vessel Name Date of

sale Year Built

Type DWT Proceeds Cap Gain NBV Booked in

Alam Sempurna

Nov-08 Feb-84 Handysize

Bulker 28,094 13.7 8.1 5.6 1Q09

Alam Selamat Nov-10 Jul-92 Handysize

Bulker 39,110 49.3 22.6 26.7 4Q10

Alam Bitara Feb-11 May-99 MR Tanker 45,513 19.0 6.0 13.0 1Q11


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APPENDIX II POSH- Corporate Profile POSH Semco is a leading offshore marine services provider that leverages some 60 years of operating experience and specialised expertise in offshore and marine oil field services. A member of the well-established Kuok Group, POSH Semco was created through the merger of several companies with strong heritage and solid reputation as pioneers and leaders in their respective fields of operation from as early as 1951. The combined assets, experience project background and track record of these companies have enhanced POSH Semco’s leadership position in the oil and gas support industries. Our core competencies spread across five key business divisions: Deepwater services, Offshore Construction Support services, EPIC services, Harbour services, and Emergency Response services. POSH Semco operates a young and diverse fleet that is reflective of the depth and breadth of its capabilities and expertise. Our highly experienced team has been recognized by customers for their professionalism and commitment to service quality and safety. In addition, our long and impeccable track record serves as a benchmark for us to continuously raise the bar on operational excellence. Business Division POSH offers an unrivalled portfolio of services for an, all-rounded customer experience. Each of our teams possess a strong heritage of service excellence and we endeavor to go the extra mile in adding value to you in all our service deliveries, as catered to your needs. This operational culture is what sets POSH apart from the competition. Deepwater Services Division: Deepwater Services division operates a young and powerful fleet of modern offshore support vessels ranging from 100 tons to 200 tons bollard pull. The fleet services the deep sea anchor handling and supply needs of FPSOs, as well as jack-up and floater rigs. As a leader in ocean towage, our fleet trades worldwide with a track record of operations ranging from Asia Pacific to West Africa and Brazil. Offshore Construction Division: Offshore Construction division operates a fleet of modern AHT, tank and submersible barges, and accommodation vessels. The fleet operates mainly on the continental shelf of the Asia Pacific and Indian Ocean, supporting offshore construction activities, including pipe laying and installation, as well as the commissioning and maintenance of offshore platforms. Engineering, Procurement, Installation, and Commissioning (EPIC) Division: EPIC Services specializes in FPSO towage, positioning, mooring and hook-up, dry tow and float over services for positioning and installing large offshore platforms and topsides. Our track record boasts the towage and hook-up of the largest FPSOs, such as Hai Yang Shi You 117 FPSO, Kizomba A & B FPSO and Agbami FPSO. POSH is well recognized as one of the leading FPSO towing specialists. Fully backed by in-house assets and expertise, we offer one-stop turnkey service, providing a seamless range of engineering and FPSO solutions. Harbour Services Division: Operates a modern fleet of ASD harbour tugs ranging from 40 tons to 60 tons bollard pull. In addition, we operate a fleet of heavy lift crane barges of up to 1,500 tons SWL. Our fleet operates mainly in Singapore waters, but also supports shipyards in Singapore, Batam and Johor. Some of our harbour tugs also operate in Malaysia, Vietnam and the Pacific Islands. Emergency Response Division: The division offers a comprehensive array of services, equipment, and personnel capable of handling salvage and oil spill events in Asia Pacific and Indian Ocean regions. POSH Semco’s heritage can be traced back to its days of marine salvage and rescue operations as Semco Salvage and Selco Salvage, the industry’s leading salvors since 1951. Our salvage track record and exploits are second to none and form a heritage we are proud to call our own. Our oil spill response vessel, Salvixen, is moored at the POSH Jurong Marine Base. It is fully stocked with all the necessary salvage and oil spill equipment and materials. We are able to quickly mobilize all necessary resources and manpower to respond to any emergency salvage or oil spill incident.

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MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X).

(Bank Pelaburan)

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MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS

STOCK RECOMMENDATIONS

BUY Total return is expected to be >15% over the next 12 months.

TRADING BUY Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been assigned due to positive newsflow.

NEUTRAL Total return is expected to be between -15% and +15% over the next 12 months.

SELL Total return is expected to be 15% within 3-months after a Trading Sell rating has been assigned due to negative newsflow.

SECTOR RECOMMENDATIONS

POSITIVE The sector is expected to outperform the overall market over the next 12 months.

NEUTRAL The sector is to perform in line with the overall market over the next 12 months.

NEGATIVE The sector is expected to underperform the overall market over the next 12 months.

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Documents

Malaysian Bulk Carriers BUYMalaysian shipping sector, with operations mainly in the transport of dry bulk cargo and tankers, with a fleet of 15 vessels and plying routes in the Asia